Bayou Health faces changes, and queries from legislators

Legislators question value of private firms to handle Medicaid

Advocate staff file photo by BILL FEIG -- Aerial of the State Capitol building and grounds.

The state’s Medicaid privatization initiative is approaching its third birthday and the Jindal administration claims it’s resulting in taxpayer savings.

But the administration has been unable to provide the numbers that would compare the costs of traditional government-provided Medicaid versus the costs under the private healthcare model. It’s an elusive number because of the complexity of the program, state Department of Health and Hospitals Chief of Staff Calder Lynch said.

But legislators have been asking for specific numbers as the first contracts are set to expire and as the administration contemplates changes in how health care services are provided to about 900,000 Louisiana residents — most of them pregnant women and children — for the next few years.

“We still have not gotten the information we asked for,” said House Appropriations Committee Chairman Jim Fannin, R-Jonesboro.

More than a year ago, he asked the state Department of Health and Hospitals to provide the panel, which oversees state government spending, monthly updates on expenses and growth in utilization. The number of enrollees and the amounts spent on Medicaid health care have a significant impact on the state’s budget.

“We can count people and we can count dollars, and we ought to be able to determine how we compare with what we have done in the past,” Fannin said.

But, Lynch said, what the administration can show is that while Medicaid healthcare costs are growing nationally at 5 percent a year, Louisiana is one of the states with the lowest growth rates, under 3 percent last year. That’s attributable to Bayou Health, the privatization program the administration launched in February 2012, he said.

The initial year of privatization, the state was able to reduce the Medicaid budget by $135.9 million, Lynch said. Since that time, the savings has been measured in less growth in expenditures than was initially anticipated, he said.

It’s also too early to determine whether Bayou Health enrollees are getting healthier, but officials expect they are because of better care coordination.

Last fiscal year, Bayou Health payments totaled more than $2.6 billion, according to DHH. Since its launch, expenditures have totaled more than $5.2 billion.

In about six weeks, the Jindal administration plans to return to the private market and ask companies to submit proposals on the costs and services that the state can contract for to provide care for about two-thirds of the state’s 1.4 million Medicaid recipients.

Changes are expected, but exactly what is being contemplated is not being released to the public.

“We have definitely been having a lot of conversations (about) where we are moving with Bayou Health,” Lynch said. “We are continuing to make decisions as we finish the request for proposals ... There might be a new plan. There might be fewer plans.”

The doctors and hospitals that are paid through the private contracts and the legislators who oversee Medicaid say early indications are that the Jindal administration wants to move toward a model in which government pays the premiums on an insurance policy that contracts with providers. Most of the current Bayou Health patients are under another model, widely favored by the state’s physicians, that pays providers directly for their services.

As a new “request for proposals” is being developed, Lynch said, officials are trying to “capitalize on the strengths” of both models.

The two most popular plans follow a “shared savings” model, in which companies are paid a management fee to handle payments to physicians, hospitals and other providers on a fee-for-service basis. United Healthcare and Community Health Solutions have more than half the enrollees. Their incentive to keep costs down is that the plans get a percentage of verified savings.

The three other plans are based on a straight insurance model, in which the state pays companies a “capitated” monthly premium for members’ coverage. Capitation is a payment arrangement in which health care service providers are paid a set amount for each enrolled person assigned to them, over a set period of time. Those are Amerigroup Real Solutions, AmeriHealth Caritas Louisiana and Louisiana Healthcare Connections.

“The last I heard, they were moving everything to capitated instead of fee-for-service,” said state Sen. Fred Mills, R-St. Martinville, vice chairman of the Senate Health and Welfare Committee.

The Jindal administration originally wanted Medicaid privatization to look like the insurance premium-based plan but acquiesced to allow the “shared savings” favored by physicians.

Which of the two health plan models has proved more successful in keeping costs down is the subject of debate.

Last fiscal year, the $2.6 billion spent broke down almost equally between the two models, according to DHH. There were more lives covered by the two “shared savings” plans.

Legislative Fiscal Office health care specialist Shawn Hotstream said no true cost comparison has been done by DHH between the two models. “It’s an evolving analysis,” he said.

The Louisiana State Medical Society’s director of legal affairs, Greg Waddell, said the state health agency has not shared any valid financial statistics or analysis.

However, a just-released DHH report, adjusted to provide “comparable” numbers, found the insurance-based “prepaid” plan to be more cost-effective to the state. In the comparison, the agency performed a “risk adjustment” based on the plans’ enrollees. It came up with a per-member, per-month cost, based on January 2013 through October 2013 data.